Next Scottish Government faces tough choices as funding advantage diminishes, says IFS

The next Scottish Government will face tough choices as funding for devolved services continues to fall, according to a new report by the Institute for Fiscal Studies (IFS).  

Last year, the government received 26 per cent more per resident for devolved public services from the UK Government than was spent on comparable services in England. 

However, the think tank said it expects the funding for Holyrood to “slow significantly” over the next few years.   

The funding currently contributes to greater public service provision north of the border, including smaller school classes, free university tuition, and free personal care services. 

If similar services and commitments are to remain over the next parliament, the IFS says the next government would be required to either raise taxes or cut spending elsewhere.  

The think tank said that by 2028-29, the total resource budget for day-to-day spending would rise from £52.2bn to £53.7bn, representing a roughly one per cent average annual increase. However, after removing projected allocations for benefits, the total would fall to an average of 0.3 per cent per year – £45.4bn rising to £45.9bn by 2028-29. 

In 2019-20, the Scottish Government received 32 per cent more per resident than was spent in England, but by 2028–29, it is set to receive only 23 per cent more. 

The squeeze seen so far since 2019–20 has taken place during a period when Scottish Government funding has actually been increasing by around two per cent a year in real terms. The IFS argues that it is not an inconsiderable amount, but it is slower than in England. 

The report states: “After several years during which resource funding has grown at a decent pace, growth in funding is set to slow significantly over the next few years, posing budgetary challenges for the next Scottish Government.  

“These must be borne in mind when assessing the spending and policy proposals set out by both current ministers and opposition parties.” 

It added: “If residents of Scotland wish to continue to enjoy a more generously funded set of public services and benefits than is provided in other parts of the UK, it will be increasingly necessary for them to contribute more towards the cost through higher devolved revenues.” 

Helen Miller, IFS director, described a “tricky funding outlook” for the next Scottish Government that has “important implications for assessing the proposals” the parties will make ahead of the Scottish Parliament election. 

She added: “Cuts to some taxes or increases in spending on priority items are feasible but will require tough choices elsewhere in a Scottish budget which will already be under some strain.” 

Scottish Conservative finance spokesperson Craig Hoy said: “This report makes it clear that if the SNP remain in government after the next election, Scots will continue to pay more while getting less.”